Here's What Makes a Good Location for Latino Entrepreneurs to Start a Successful Business
This week is National Small Business Week, celebrating an important and growing segment of the U.S. economy, especially when it comes to Latinos who are starting up enterprises faster than the national average.
For entrepreneurs, starting up a business is not easy, especially in some places. As one WalletHub study that Latin Post reported last week showed, some places in the U.S. are much more conducive than others for Latino entrepreneurs starting successful businesses.
So what makes a place to start your business? Here are the factors the WalletHub study looked for when rating a given metropolitan area for their study on the 2016 best and worst U.S. cities for Hispanic entrepreneurs.
In ranking cities for their business-friendliness, the study identified 19 different metrics, and weighted those factors as they affect Latino entrepreneurs. Most of these metrics can be grouped into three major categories: networks, money, and resources for growth.
Friendly Business Networks
The factors weighed most heavily by the study relate to business networks of Latinos: "Share of Hispanic-owned businesses" and "Hispanic Entrepreneurship rate" both got double weight in the study's methodology.
One could see these as self-evident metrics to measure a city's Latino entrepreneurial climate; obviously a city with a lot of existing Latino entrepreneurs and businesses is a good indicator that the area is ripe for Latino entrepreneurship.
But beyond the tautology is the important fact wherever you start a new business: you need access to a friendly network of peers, mentors, and other businesses. Other entrepreneurs and enterprises are essential for advice, resources, and opening doors to more opportunities, connections, and networks.
Other highly ranked factors by the study included industry variety (diversity of the local network), entrepreneurial activity (peer groups), and significant startups per capita.
The key here is that unless you're Sir James Dyson, your business won't grow in a vacuum.
Access to Capital, Affordability
Every business needs capital to start and grow, so the next highly weighted metrics relate to costs, policy, and an area's small business loan climate. "Small business loans per total number of small businesses" indicates how easy it is to get the funding your business needs, while other factors like average monthly rent for office space and corporate tax rank are important as well.
Also important, both from an entrepreneurial and after-work point of view is an area's affordability, given full weight in the study. Simply put, if you're in a great area for business but are going into debt just to pay the rent where you live, that will affect your business. It'll also affect how much you'll have to pay to find talent as your enterprise grows.
Finally, there's the growth factor of an area. Simply put, wherever the local economy is stable, healthy and growing is where you have a better chance for your business to follow suit.
So factors like the Latino unemployment rate, income growth, education, and housing tenure of residents all factor heavily, as does the self-evident 5-year survival rate for businesses in a given area.
Texas, Not Rhode Island
Put all these factors together and you have a way to judge what places are better or worse for Latino entrepreneurs. As Latin Post reported, Providence Rhode Island has consistently ranked close to the worst place for Latino entrepreneurs, while south Texas is a standout hub of Latino entrepreneurial activity.
Read our coverage for more details on where you might want to start your business, and what places you might want to avoid.